Citi on Path to Higher Capital Return: Analysts

The third largest U.S. bank did better than many of its peers in the Fed's annual stress test.

NEW YORK ( TheStreet) -- Citigroup's ( C) superior performance in the Federal Reserve'sannual stress tests suggests that the bank has made progress in de-risking its balance sheet and is well-placed to return more capital to shareholders, analysts said in early reactions to the results.

The Federal Reserve's estimated $55 billion in losses for Citigroup through 2014 in a severe recession "were 18% lower than last year and 34% lower than our estimate - suggesting a de-risked balance sheet. This is important for a stock trading below TBV tangible book value , as market multiples improve as investor feel more comfortable about balance sheet risk," Penala wrote.

The analyst reiterated her buy rating and raised her target price on the stock to $50 from $46.

Shares of Citigroup were up 2% in early trading, to $45.79.

The Federal Reserve said after the close on Thursday that 17 of the 18 largest banks passed the regulator's annual test that gauges the ability of banks to withstand a deep recession.

Atlantic Equities analyst Richard Staite noted Citi's improvement in performance over the previous year. "Not only did Citi go into the test with a higher Tier 1 common ratio at 12.7% vs 11.7% but the stress impact was less at 4.4% vs 5.8% last year," he wrote. "Thus its minimum ratio through the test was 8.3% vs 5.9% leaving it with a $32bn capital cushion vs only $9bn last year."